Market Has Lit Its Last Rock (of Crack)
OK – so the DAX is up a little over 400 points in three sessions – apparently the Krauts are perfectly happy that their children’s labour is being sold off by a bunch of wog bureaucrats (Draghi and Monti), and they think that it’s all Schmiles und Sunschein from here on out. Alles ist gut – ze Woggo überbanksters are going to fix everytink mit die clever wog-bond-buying.
Now the Krauts are supposedly a pretty hard-headed lot: good engineers and so forth. They’re not known for being the most credulous bunch in the world, although they did fall for that little guy with a funny moustache in the early part of last century… what was his name again? Charlie Chaplin? No… Adolf something. You know the guy – he’s on the History Channel pretty much every day. Not a fan of the Red Sea Pedestrians, if memory serves.
Anyhow… let’s leave lapses like that aside. Everyone gets to make one big mistake per century.
The other thing that the Kraut market reveals in spades is trend-following that makes the Nasdaq traders from 1999 and 2000 seem positively contrarian by comparison. At turning points, you would swear that there’s nobody on the other side of the market in DAX futures/CFDs… the thing melts up (or down, at oversold extremes) 10, 15 points in twenty seconds, and can’t get a pullback for love nor money.
And just when you think that the trend will go on forever… something intervenes.
It’s kind of like how the whole “1000 Year Reich” schtick changed when someone pointed out that the Red Army artillery was on the outskirts of Berlin.
And so it will be when someone points out that France and Germany can’t afford to bail out their sun-drenched lazy Southern cousins (well Germany tout seul, in fact: France is as broke as Greece but nobody has the balls to make that call… yet).
For the moment, anybody who tries to short the DAX gets to feel the “hot buttered carrot” (or as Mav might say, the Gatorade Bottle of Doom up the Vord) for a while.
But let me say this: shorts taken any time after the first hundred points of the DAX’s post-post-Draghi bounce (i.e., any short taken with the market at 6651 or above) will eventually pay off. And once it waterfalls, it will happen in days.